Unfinished Business

The big news this week was the filing of charges and settlements for price manipulation and “spoofing” brought by the CFTC, in conjunction with the DOJ and FBI, against three banks and a half dozen individual traders; mostly involving illegal trading activities in COMEX gold and silver futures. The announcement set off a debate about whether the filing proved the allegations that gold and silver prices were manipulated as many, certainly including me, have maintained.

Put simply, the filings do not prove that silver and gold have been manipulated lower in price over the years. But then again, neither do the filings show that prices have not been manipulated in the manner I contend. What the charges do prove is that spoofing is a corrupt and illegal practice that should not exist in any form and on that basis. My immediate reaction is what the heck took the CFTC this long to act? Regular readers know I have railed against spoofing for many years as being completely devoid of any redeeming or legitimate features while the CFTC stood by. The practice of placing phony orders to influence price should have been outlawed from day one.

That said, I suppose it is good that the agency finally took action, under the kindest interpretation of the cliché of it’s better late than never. Certainly, those banks and traders accused of the practice will likely not do so in the future. And seeing the CFTC actually use the word manipulation in connection with COMEX gold and silver can’t be considered bad. Beyond that, unfortunately, the charges and settlements are troubling in that they only scratch the surface of whether silver and gold prices are manipulated.

Truth be told, if the regulators were out to clean up what ails silver and gold pricing, then they didn’t come close with these filings. If the CFTC was intending that this week’s announcements showed that it was truly cracking down on bad actors in silver and gold, then it failed. I would remind you that many of the violations announced took place while the CFTC was in the midst of its infamous five year silver “investigation”.

Think I’m being too hard on the CFTC? Then try explaining how the agency has managed to ignore the activities of the most prominent gold and silver market crook of all – JPMorgan. It’s not as if the agency hasn’t been given ample evidence of JPMorgan’s dominant role in manipulating prices ever since the bank took over Bear Stearns in 2008. I know because I’ve done nothing but make the case against JPMorgan for nearly all that time.

And I must say, I am disappointed in the actions, or lack thereof, of the Enforcement Director, James McDonald. Privately, I’m still assured that McDonald is a straight arrow, although lately the question has come up whether what JPMorgan is doing is really illegal if higher ups in the government pecking order have ordered McDonald to keep off JPM’s case. To that I say balderdash – in matters silver and gold, JPMorgan is a stone cold crook and no order from above supersedes McDonald’s oath to uphold the Constitution and the law of the land. It’s disturbing that the agency seems to be going after the little fish, while the biggest market crook of them all, JPMorgan, gets a pass.

It’s not as if I haven’t gone out of my way to present the case against JPMorgan to McDonald, starting on his first day on the job last April 10. I spelled out in great detail how JPMorgan had never taken a loss on any short position it ever added in COMEX silver in nearly 10 years; a trading record that would be impossible if JPMorgan wasn’t rigging prices. And get this – since I wrote to McDonald last year, JPMorgan has added and bought back silver shorts on four separate occasions for more than 10,000 net contracts on each occasions, making close to $500 million in total trading profits. As a reminder, I base all my calculations on the data published by the agency.

In that public letter last year, I even spelled out the rationale for why JPMorgan was manipulating silver (and gold) prices, namely, to allow this crooked bank in acquiring as much physical metal as it could get at the lowest prices it could rig. This is the means, motive, opportunity and intent behind JPMorgan’s manipulation – to pick up as much cheap metal as it possibly could. In the last 10 months, in addition to racking up massive profits in paper COMEX trading, JPMorgan has added another 100 million oz of silver to a hoard now measuring nearly 700 million oz. And as I have written recently, JPMorgan has been doing the exact same thing in gold, namely, making enormous paper profits by being the largest short in COMEX gold, while picking up boatloads of physical gold on the cheap – at least 20 million oz over the past 5 years.

You can lead a horse to water but you can’t force it to drink. I can lay out the crimes of JPMorgan, using the agency’s data and taking the risk of publicly accusing the nation’s largest bank of criminality, but I can’t force to the CFTC to do its job. After all, the easiest way to dismiss these very serious allegations would be to openly address them. To be fair, should the CFTC ever get around to cracking down on the crooks at JPMorgan, I will happily eat my words and sing the regulators’ praises.

After publishing unique precious metals commentary on the Internet since 1996, I have decided to offer a subscription service. The main reason for the change is that I felt somewhat restricted by my weekly format.

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